Fraud hits 13-year high

Published by Liam Tarry on 02 February 2009. Last updated on 02 February 2009

Fraud hit its highest level for 13 years in 2008, as cash-strapped consumers and businesses struggled to cope with the economic downturn.

Accountancy firm KPMG says more than £1.1 billion worth of criminal fraud cases were heard in court last year – the highest number since 1995. And it warns that the courts are likely to see the number of fraud cases increase further as the majority of cases committed since the credit crunch began in August 2007 are yet to be heard.

Plus, with household and business budgets still stretched and the UK now in a recession, the number of people committing fraud should continue to rise.

"These figures are bad enough in themselves, but I fear the trend for the next couple of years will be even worse," says Hitesh Patel, fraud investigation partner at KPMG Forensic. "As the global economic downturn takes hold and organisations look ever more closely at their operations it is very likely that more fraud will come to light so that the real impact of the credit crunch on fraud is yet to be fully felt."

According to KPMG, fraud by individual company managers, employees and customers trebled to £300 million last year, while crime by professional gangs remained at the "extremely high" levels seen in previous years.

The worst-hit sector was the financial services industry, with £388 million of fraud reported – a 10-fold increase on 2007’s level.

The findings echo a recent analysis of fraud trends by CIFAS - the UK's fraud prevention service. Its report found that fraud increased by 16% last year.

There was a sharp increase in account takeover fraud, where a third party gains access to the account of an innocent victim through online ‘phishing’ scams, or by the interception of credit cards and bank statements.

Attempts to commit fraud by lying on application forms for loans, credit cards or insurance products also remain high. According to CIFAS the most frequent lie told remains the failure to disclose, when asked, a previous address where the applicant's credit or insurance history has been impaired.

Peter Hurst, chief executive of CIFAS, warns: "With Britain now in recession, a significant rise in fraud is inevitable, as people turn to crime to make ends meet.

“These figures are just the beginning. They also show very clearly that fraudsters adapt their methods in response to changes in the financial markets.”